The Most Profitable Oil Company in the World

Or is it????

Who is ExxonMobil? World’s largest publicly traded petroleum and natural gas company Industry leader in almost all aspects of energy and petrochemical business Involved in exploration, production, and transportation of its products: –Crude Oil –Natural Gas –Petroleum Operate on six continents under the brand names Exxon, Esso and Mobil

What does ExxonMobil do? Upstream –Exploration and Production Holdings in 36 countries Downstream –Manufacturing, transportation and distribution 38 refineries in 21 countries In 2007, refinery throughput averaged 5.6 million barrels per day, and petroleum product sales were 7.1 million barrels per day

What does ExxonMobil do? Chemical –Petrochemicals More than 90 % of chemical capacity is employed in businesses where we ExxonMobil ranks first or second in worldwide market position. Technology –Innovation $3.5 billion spent over last 5 years on research Focus on maximizing performance in remote areas/difficult operating environments

Current Factors affecting the ExxonMobil and the Oil Industry Volatility Market uncertainty Rising costs Skill shortages

Current Factors affecting ExxonMobil and the Oil Industry: Volatility Market uncertainty Rising costs Skill shortages

Current Factors affecting ExxonMobil and the Oil Industry: Biofuels Energy allocation Environmental issues Global Energy Demand

Current factors affecting ExxonMobil: Offshore drilling

Current factors affecting ExxonMobil: Outrage associated with record profits

Current factors affecting ExxonMobil: Windfall Profit Tax

Hugo Chavez I am going halt crude oil shipments to ExxonMobil refineries! Current factors affecting ExxonMobil:

Exxon Valdez Case Current factors affecting ExxonMobil:

2007 Financial Performance Sales: $390.3 billion – 94.28% increase from 2002 Gross Margin: 42.8% (Industry: 46.2%) –55.5% in 2002 Operating Margin: 17.42% (Industry: 5.1%) – 8.71% in 2002 Net Profit: $40.6 billion –254% increase since 2002

FYE 2007 Financial Ratios Dividend Yield: 1.60% – Industry Avg. of 1.60% Price / Earnings: – Industry Avg. of 13.5 ROE: 33.35% – Industry Avg. of 28.7% Beta*:.95

Net Profit *From the 2007 ExxonMobil Annual Report

Shareholder Return *From the 2007 ExxonMobil Annual Report

Future Financial Health Analysts expect the company to grow at a steady rate of 11% over the next five years –Hoovers, Goldman-Sachs, Merrill Lynch The earnings are expected to grow at 8% This will put the earnings per share over $9 a share in 2010

Growth rate of earnings Assumptions: Growth rate of 8% Lower growth rate than in the past due to uncertanties in the market Production is down compared to past – there is some cash flow uncertainty since recent cash flows have been bolstered by commodities trading

Analysis This is a respectable growth However, not the immense growth that the company has recently had Future forces such as shareholder’s concern with the environment, political turmoil, and oil commodity pricing will effect Exxon This combined with forecast of the company will support investing at ‘weight’

Forecast Relaxed prices Decreased Domestic Demand (20%) Increased Global Demand (80%) Energy Information Association

Washington Windfall Profit Tax-Highly Unlikely Conservative vs. Liberal Off shore Drilling?

Energy Cycle Capital E&P Extraction Refinement Shipment

Cracking Towers

Hold At Weight Buy Vanguard VDE Production Life Cycle Cracking Spread Market Weighted

Top Holdings

Exxon vs. Market Diversified Service Sector Segmented

Stock Re-Purchase Stakeholder Theory Board of Directors Myopic Management? Best Option? EPS Management